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| India Inc's wish list: Stability, tax breaks, infrastructure |
| BS Reporters / Mumbai/New Delhi May 15, 2009, 00:22 IST |
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Exit polls have a way of going horribly wrong, as they did in 2004. And India Inc is hoping it stays that way this time, too. That’s because industry is concerned that the fractured verdict predicted by various media channels yesterday would mean continued uncertainty on the economic policy initiatives that need to be taken up on a war-footing.
Listen to Marico Chairman Harsh Mariwala. “The biggest challenge for the new government will be to give industry and investors the assurance that it will last for the full five years. The rest will fall in place,” he said.
India Inc’s wish list, however, is ready. Although most CEOs want the next government to consider tax benefits for the sectors in which they operate (for example, Fiat India CEO Rajeev Kapoor said he would “certainly want” a further excise duty cut on cars), others are willing to look at the big picture and want the new government to forget the “ongoing game of political chess” to focus on infrastructure, since that alone will result in employment generation.
ICICI Bank Chairman K V Kamath, for example, wants the government to put “big numbers” to growth. "We should articulate clearly that we want to achieve 10 per cent growth and then try to work on the underpinnings to make that possible,” he said.
“Underpinnings would mean that monetary and fiscal policies are aligned as the world enters a situation in which liquidity should not be an issue,” Kamath added. “We can do a whole lot of things on ambitious infrastructure projects that transforms nations.”
Kamath said the Golden Quadrilateral project in 2000 was the beginning of the industrial turnaround from the problems of the nineties.
HDFC Chairman Deepak Parekh, who has been known to be an unofficial consultant to successive governments, agreed. Parekh said the fiscal deficit shouldn’t be an overriding concern, because the country cannot afford a growth rate of 4 only to 5 per cent. Public spending in infrastructure sectors such as roads and ports must go up, as they create employment. “Such construction should take place on all seven days, 24x7,” Parekh said.
Infrastructure and employment are the key themes for Infosys CEO & Managing Director Kris Gopalakrishnan, too. The new government must help stimulate adequate jobs, he says.
On the IT industry, Gopalakrishnan said he wants the government to bring in more clarity to policies such as those on special economic zones and improve the turnaround time to approve new projects.
TVS Motors Chairman and MD Venu Srinivasan (who is also the Confederation of Indian Industries President) had more specific suggestions. He said the first 100 days of the new government must see projects such as building two million low-cost housing units and constructing ports and roads on a public-private partnership basis.
Others suggest some grand ideas to drive demand and boost consumption. For example, Future Group Chief Kishore Biyani said measures like free rice and sugar should be extended to give colour televisions at concessional rates. “I am sure sentiments are bound to improve if even 25 million homes in a country of over one billion people get TV and watch advertisements,” he said .
Biyani also wanted the government to give shopping vouchers as incentives in order to boost consumption, apart from tax incentives on spending.
Predictably, tax rationalisation is the other top item on the wish list. While Dabur India CEO Sunil Duggal wanted the multiplicity of taxes to be removed, Samsung Deputy MD R Zutshi wanted more tax stimulants like the recent Cenvat cuts to boost manufacturing, which in turn will boost consumer sentiment. And Hero Honda Motors MD Pawan Munjal wanted the government to ensure a time-bound rollout of the Goods and Service Tax (GST) regime by April 2010 to create a single market.
Ford India MD Michael Boneham says the new government should focus on the significant differential in the way automobiles are taxed in India. For example, the additional excise duty on big cars and sports utility vehicles has outlived its utility.
Most expected the Congress and the BJP to implement their election manifesto promise of giving significant reliefs on personal taxes. For instance, BJP has said that it would withdraw the Fringe Benefit Tax and increase the slab for personal tax to Rs 3 lakh. Likewise, even the Congress has agreed to increase the slab for personal tax.
Kensaku Konishi, President & CEO, Canon India, strongly pitched for a reduction in customs duties to minimise the existence of the grey market. For instance, the organised digital camera market is one million units and the grey market is 70,000 units. On Konishi’s wish-list also is a uniform tax across the country.
Capital market players also have a long list of expectations. Motilal Oswal, CMD, Motilal Oswal Securities, said the government must remove or reduce dividend distribution tax and securities transaction tax in order to give a fillip to the markets. He also wanted the government to focus on fiscal management.
For the majority, however, the immediate hope is to get a stable government. India Infoline Chief Nirmal Jain said though a Third Front government is highly unlikely, that could be only a small consolation, as the coalition pressures on UPA or NDA could be heavier this time round.
He, however, feels the markets may rally if the BJP-led National Democratic Alliance comes to power. “They are perceived to be pro-markets and will take measures such as interest rate cut and PSU disinvestment,” Jain said.
Although few people are losing their sleep over the mounting fiscal deficit, rating agency Fitch’s Head of Asia Sovereigns James McCormack said the new government faces considerable challenges in balancing the need for short-term stimulus measures to counter the economic downturn and the necessity of re-establishing a sustainable medium-term path for the country’s public finances.
“While current economic conditions are prompting many governments to undertake counter-cyclical stimulus measures, the recent deterioration in India’s fiscal position accentuates underlying structural weaknesses in public finances that, if unaddressed, could undermine sovereign creditworthiness,” he said.
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